The price of Premium Motor Spirit (PMS), also known as petrol, could continue to decline if the downward trend in global crude oil prices persists.
Economic analysts suggest that this reduction could be further reinforced by the stability of the naira against the dollar in the foreign exchange market, which plays a crucial role in determining fuel prices in Nigeria.
This week, crude oil prices fell by about two per cent, hitting their lowest levels in 12 weeks amid reports that OPEC+ will proceed with a planned oil output increase in April.
Brent futures fell $1.19, or 1.6 per cent, to settle at $71.62 a barrel, while the United States West Texas Intermediate crude fell $1.39, or two per cent, to settle at $68.37.
According to Reuters, these are the lowest price points since December 6 for Brent crude and December 9 for WTI.
The price drop followed reports that the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), have agreed to go ahead with their planned oil production increase in April.
Petrol Prices Drop Amidst ‘Price War’
In Nigeria, players in the downstream oil sector have consistently noted that crude oil prices and foreign exchange rates are the primary determinants of petrol pump prices.
Last week, Dangote Refinery reduced its ex-depot price of petrol from ₦890 per litre to ₦825 per litre. In response, the Nigerian National Petroleum Company Limited (NNPC) matched Dangote’s new pricing, triggering what many industry experts described as a price war.
Experts Predict Further Reductions
Economic expert Paul Alaje, believes the price slash is sustainable and could fall below ₦700 per litre, given current market realities.
“It is sustainable to reduce petrol prices to ₦700 based on today’s reality of the exchange rate. The challenge we may have is a global crisis that pushes crude oil prices up. If that happens, we will see a difference. But for now, we are seeing relative stability,” Alaje said during an interview on Channels Television.
“Our computation reveals that PMS should be around ₦795 to ₦820 per litre at the moment,” he added.
Similarly, the National President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, has reiterated that petrol prices will continue to fluctuate depending on the foreign exchange rate and international crude oil prices.
While lower crude oil prices translate to cheaper fuel for Nigerians, analysts have expressed concerns over its impact on government revenue projections.
The Federal Government’s 2025 budget was calculated based on an oil price benchmark of $74 per barrel. With current prices falling below this mark, there could be shortfalls in projected government revenue, potentially affecting budget implementation.